OnDeck Capital Raises $77M Led by Tiger Global to Expand Small Business Lending

Tiger Global Management led a $77 million growth round in OnDeck Capital Inc., bankrolling the small business lending site’s international and product expansion plans while raising the bar for other companies in the growing alternative lending sector.

OnDeck Capital

OnDeck Capital CEO Noah Breslow

The round increases total venture funding to the New York-based company to $180 million and comes as OnDeck approaches the milestone of providing $1 billion in loans to small businesses nationwide.

OnDeck more than doubled revenue last year to $65 million, had cash in the bank from its last funding round and is “imminently” profitable, according to OnDeck Chief Executive Noah Breslow, who added that he expects to double revenue again in 2014.

Mr. Breslow said the growth round came together quickly, with discussions beginning in early January and closing some six weeks later.

“The market, the sector and the company all lined up,” said Mr. Breslow of what he described as a competitive and fast fundraising process. “Lending is the last sector to be disrupted [by the Internet],” he said.

Despite the investment from Tiger Global, which often backs companies headed for the public markets, the company said there were no imminent IPO plans. Valuation was not disclosed.

From Lending Club Corp., Prosper Inc. and Wonga Ltd., which have raised a combined total of $485 million, to smaller startups like Zopa Inc. and Fundera Inc., venture investors have poured hundreds of millions into startups leveraging big data to make quick, and they believe prudent, decisions on consumer loans.

By blending financial algorithms with digital exhaust from social networks, these startups aim to get better information about individuals seeking loans that goes beyond traditional credit scores.

OnDeck, like Kabbage Inc., which has raised roughly $53 million in venture funding, operates in a similar way, but focuses on business lending. Both startups collect information about small businesses from sources including bank transactions, social networks and review sites like Yelp to quickly deliver a response to funding requests.

OnDeck reports it responds to loan requests within minutes and can fund loans as fast as one day. The company offers $5,000 to $250,000.loans, repayable from 3 to 24 months.

Mr. Breslow said the “bottleneck” now limiting company growth is increasing the number of borrowers choosing OnDeck over traditional bank and credit union loans.

“The biggest obstacle for us is still getting the word out,” Mr. Breslow said.

OnDeck’s access to lending capital is not an issue, he said. The company has raised more than $300 million in debt financing from Goldman Sachs, Deutsche Bank and others and will raise more as needed, he said.

“The Goldman facility several years ago [provided better terms] than what we started with in 2012 and Deutsche was on improved terms from Goldman,” Mr. Breslow said. “We are in the process of having conversations for additional credit facilities as the company continues to grow. We are getting inbound requests every day.”

Mr. Breslow said OnDeck will use the $77 million to expand its marketing efforts, expand internationally and diversify from its current single loan product. Funds will also be used to double its 250-person team working at its New York headquarters and at offices in Arlington, Va., and Denver.

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